August car sales expected to show another hot month for the industry

Car makers report their August sales numbers Wednesday. All indications point toward another strong month for the industry. And while they might not match what one analyst called the “epic” August of 2013, they’ll be close.

Industry analysts are predicting 1.5 million new cars and light trucks were sold in the United States last month, which would put the seasonally adjusted annualized rate of sales, or SAAR, at 16.6 million vehicles.

“Although growth has slowed, sales remain steady and on pace to end the year strong … Spending was restrained for the first part of the year, and has crawled upward in recent months. Sales also will be boosted by the Labor Day weekend, which is traditionally one of the strongest weekends of the year for vehicle sales,” said Alec Gutierrez, senior analyst for Kelley Blue Book.

Several economic factors are currently favoring the car industry. One of them is consumer sentiment, which bounced back in August from a drop in July, helped in part by a strong month in the stock market.

Sentiment doesn’t automatically translate into spending, however. Consumer spending actually slipped 0.1% in July. But with overall confidence in the economy on the rise, August spending data is likely to tell a more upbeat tale, and car purchases are expected to be a big part of it.

There’s also a strong historical correlation between car sales and employment. The nation’s jobless numbers continue their slow, steady decline, down to 6.2% in July, which is a down a full 4 percentage points from its 2009 peak.

But consumers are also responding to hot new models being offered by the automotive industry. Chrysler
/quotes/zigman/213459/delayedIT:F, especially, is riding this wave. Of the top-selling manufacturers in the U.S. market, analysts expect Chrysler Group to lead gainers in August, both in terms of outright sales and growing market share. Analysts see Chrysler’s year-over-year sales rising from 11.1% to 15.4% in August, giving the Italian-American company a U.S. market share of about 12.6% compared with 11% a year ago.

Chrysler’s redesigned Jeep brand receives credit for most of the gains, reflecting what analysts say is marked trend toward higher-priced, higher margin vehicles, especially those that fit in the compact and mid-size SUV and crossover categories.

Another big sales boost is coming from dealers anxious to make room for 2015 models. That typically means plenty of clearance sales, and is the main reason many in the industry point to August as often the best month to get a good deal on a new car.

And this past month might have been one of the best. TrueCar, which keeps close tabs on incentives, estimates the car companies spent on average $2,772 on incentives per vehicle in August, up 9.3% from a year ago.

The company facing the toughest numbers, however, could be Volkswagen
/quotes/zigman/150347/delayedDE:VOW/quotes/zigman/150345/delayedXE:VOW. Including its Audi, VW and Porsche brands, analysts are predicting Volkswagen’s overall sales fell between 8.5% and 13.3% last month, winnowing its U.S. market share down to about 3.4% from 3.8% in August 2013.

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